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Getting Married? What Are The Finance and Credit
Implications?
There is a big difference between looking after your own
finances while living alone, or with parents, and living with a
partner. The transition can be very difficult, especially if both
partners are strongly independent, or one partner is financially
weak and the other strong. In fact, it is an area of a new
relationship that has many pitfalls if you do not set the ground
rules from the start.
It is best to sit down together and quietly plan your
finances, even before you get married or move in together. Then,
when you do so, it is important to be open with each other, and
discuss what may go wrong with the domestic finances if you do
not plan correctly. That way, you can work on a plan together,
and a budget, and set ground rules for a smooth financial future
together. It is sensible to bring the use of credit into that
discussion, as there will come a time, maybe from day one, when
credit cards and other forms of credit become an issue. Agreement
on all relevant credit and finance issues will reduce the risk of
problems, arguments and misunderstandings later on.
An early decision to make is whether to keep finances separate
or not; deciding, for example, whether to have joint bank
accounts or joint credit cards.
The Benefits of Joint Accounts
The advantages of consolidating funds into one current account
include:
1. Easier record keeping.
2. Should you apply for a loan at any time, there will be less
paperwork.
3. Working closely together on the running of the account may
help to solidify the relationship and build trust. It gives an
opportunity for both of you to bring out your best co-operative
nature.
There is one drawback, though. With two people actively using
the account, it is not so easy for you to keep track of the
account transactions and balances, especially if you are both
using the account a lot. This can be overcome by discussing
openly all expenditure the day it happens.
The Benefits of Separate Accounts
Keeping separate accounts will allow each person in the
relationship more freedom: each will not need to check with their
partner over every purchase. In addition, having separate
accounts may create fewer complications in the relationship. It
will allow them to maintain a sense of independence, and this can
be very important to some relationships.
One negative to a joint finance arrangement is that it can
seem unfair. If one partner earns £40,000 per year, and the
other only £25,000, the person with the lower salary may
feel there is a lack of trust!
If you do decide to have joint bank accounts checking or
savings accounts, then you will need to find a system for paying
household bills and handling other joint finances together. One
option that works well, and that I use, is to have one joint bank
account into which you both pay each month for the house
expenses. This can work very well, especially if you sit down
together and agree the budget first, and what proportion will be
funded by each partner. It is important to get this all clear
from the start, then there is likely to be less risk of a problem
with financial arguments later on.
Joint Credit Arrangements
Something else to consider with joint finances is credit. This
can be considered beneficial, or problematical, depending on your
individual credit ratings. At some stage, though, you may both
want to apply for joint credit. This is most likely with a big
purchase, such as a car or a house. It is best to do that if you
have joint credit. With joint credit, you will both be 100%
responsible for the debt, even if you co-sign a loan with your
partner, or add your name to your partner's credit card account.
If, on the other hand, you decide to maintain separate credit,
the general rule is that you are not responsible for each other's
debt. An exception to this may be if the debt is considered a
family expense.
Should one person have had a bad credit record before
marriage, then it is advisable for the other to keep their credit
separate. A joint credit application will be considered based on
the two crdit scores, and the lower one will drag down the
other.
This
finance and credit article was written by Roy Thomsitt, owner
and author of the Eliminate Credit Card Debt Now website.
MORE RESOURCES:
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